When Fiserv recently announced that it is sunsetting its EasyLender product, we received an influx of calls at Cornerstone Advisors from clients worried about what the future holds for them. Ironically, this announcement came right on the heels of Fiserv’s acquisition of PCLender – another source of anxious client calls. Unfortunately, the Big 3 haven’t had a compelling loan origination story to tell their clients for years. The status quo, at least in terms of larger core system selection engagements, has been to propose a partner solution, or integrate to the existing (and almost certainly crappy) product.
Anyone following the banking vendor space over the past few years knows that the standalone loan origination system providers – across all lending verticals of mortgage, consumer and commercial – are clearly taking the core vendors to the cleaners. While having a go-to-market set of products and overall strategy are clearly important, there are two things standalone LOS vendors have just been doing better.
Point systems provide better system functionality (usually). On the mortgage lending side, compliance and functionality requirements skyrocketed over the past couple of years, mostly due to the TILA/RESPA Integrated Disclosure rule (TRID). As a result, point solutions have reigned supreme, with some vendors gaining hundreds of clients as banks and credit unions were forced to migrate to more robust and reliable products.
The functionality gap is growing continuously wider. In any community bank or credit union in the country, the first names mentioned in the mortgage space are Rocket Mortgage, Roostify and Blend, followed quickly by Ellie Mae’s Encompass and the other more popular mortgage LOS providers. The level of recent development in the mortgage lending space has been considerable, and no one even mentions the Big 3 in the same breath.
Best-of-breed LOS providers typically excel at service, expertise and technical support compared to the Big 3. They put knowledgeable staff at the Tier 1 service desk instead of allowing clients to get caught up in the bureaucracy that is typical of Big 3 clients.
A case in point is the acquisition of CMSI/Origenate by FIS in 2014. While CMSI/Origenate is a decent overall product in the consumer LOS space, I have heard from my clients over the past couple of years that service has not improved as they had hoped after the FIS acquisition.
Fiserv has at least been making an effort. With the acquisition of PCLender, Fiserv is looking to provide a much-needed boost to its mortgage lending offering. Even with the botched story-line in recent years surrounding the roll-out of its Common Origination Platform in 2008, which was rebranded as LoanLaunch in 2015 and currently isn’t even listed on its website, at least Fiserv has been giving it the old college try.
On the flip side is Jack Henry, which has essentially shunned any opportunity to even pretend it has a cohesive loan origination solution set for its client base. From virtually Day 1, JHA has maintained the strategy of partnering with MeridianLink, which arguably isn’t a bad move considering its broad functionality. But, it is difficult to swallow JHA’s willingness to completely outsource the functionality behind what is the lifeblood of most retail focused banks and community credit unions – consumer lending.
The standard offerings of the Big 3 today are 1) multiple systems bolted together through questionable interfaces, or 2) point solutions whose functionality have seen better days. The industry will continue to hold its collective breath that either a past or future LOS acquisition or further development of legacy platforms will help these vendors articulate a cohesive strategy and viable, go-to-market solution set.
Unfortunately for the near term, the strategy appears to remain “partner or integrate.” In all the selection projects I’ve managed over the past eight years at Cornerstone Advisors, I can count on one hand the clients that have asked to look at the Big 3 as a solution for their loan origination needs. The Big 3 are never at the top of their list, and right now, they’re not at the top of ours, either.
-DJ
If the Big 3 can provide all of the other banking services we need in an integrated fashion then, I am good with going to a third party for my Loan Origination Needs. Just give me a way to pull the Loan Documents into my Enterprise Content Management System that is already integrated to my frontend core system.
Many times the offerings of the larger companies (eg the Big 3) are not pliable enough to meet the needs of banks who are trying to differentiates their client experience and products. This desire becomes more visible in an origination application, as it is closer to the client. Many smaller LOS providers are more attuned, and in a better position, to provide a configurable experience that fulfills this desired level of differentiation.